DOJ to Challengers: Go Fish!

The CSA Doesn’t Protect Your Revenue.

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The Department of Justice filed its response to the motion seeking to freeze cannabis rescheduling and it didn’t just defend the rule, it dismantled the challengers’ entire theory of why they belong in court.

The DOJ brief, filed Thursday in the D.C. Circuit, opposes the joint motion for stay filed by NDASA (National Drug and Alcohol Screening Association) and MMJ International Holdings, who asked the court to pause the April rescheduling order that moved state-licensed medical cannabis to Schedule III.

The government’s response is blunt: the petitioners “come nowhere near satisfying the demanding standard for that extraordinary relief.”

The brief attacks on three fronts: standing, the merits, and irreparable harm, and on each, the challengers’ own arguments become the government’s best ammunition.

The “Pocketbook Interests” Problem

The most devastating section of the DOJ’s brief addresses what the Controlled Substances Act is actually for and who it’s designed to protect.

“The intended beneficiaries of the CSA are the American public and scientists and medical practitioners seeking legitimate access to controlled substances for research and patient treatment,” the brief states. “Petitioners are not the intended beneficiaries of the CSA, nor do their interests systemically align with those beneficiaries. Petitioners invoke the interests of (1) drug screeners in avoiding loss of business and increased costs; (2) employers in avoiding the costs of revising drug-testing protocols; and (3) a pharmaceutical company in preventing market competition. Petitioners thus invoke pocketbook interests served by keeping all marijuana in schedule I.”

This is the zone-of-interests doctrine deployed as a wrecking ball.

Even if the petitioners could show injury, the DOJ argues, their injuries aren’t the kind the CSA was enacted to prevent. Congress passed the CSA to protect public health and regulate drugs for legitimate medical and scientific purposes, not to guarantee revenue streams for drug testing companies or shield pharmaceutical developers from competition.

The challengers handed the government this argument themselves.

NDASA’s own sworn declarations state that marijuana-positive test results account for “more than 50%” of Medical Review Officer practice revenue, and project 35-50% revenue declines if employers stop testing. MMJ’s declaration describes eight years and $10 million invested in an FDA pathway whose “market distinction” rescheduling allegedly destroys. Neither party could resist quantifying their financial stake — and in doing so, they confirmed that their grievance is commercial, not constitutional.

Speculation Stacked on Speculation

On standing, the DOJ’s brief systematically exposes the chain of assumptions underlying NDASA’s harm theory.

The association, the government argues, offered only “generalized speculation about how the rescheduling order might affect the drug-testing industry rather than particularized allegations about how the order has affected specific members.”

The causation analysis is where it gets surgical.

NDASA’s projected injuries depend on third parties, employer clients, independently deciding to stop testing for marijuana.

“Petitioners have not shown that it is ‘predictable,’ rather than merely ‘speculative,’ that third-party employer-clients will choose to stop testing for illegal marijuana use,” the brief states. “And any increased costs to drug screeners from their clients’ continued testing would be traceable to their voluntary billing decisions, not the rescheduling order.”

This is Article III standing doctrine 101: injuries caused by the independent choices of parties not before the court are notoriously difficult to attribute to government action.

NDASA isn’t claiming the rescheduling order directly harms it, it’s claiming employers might react to the order in ways that might reduce demand for its members’ services. Federal courts routinely reject standing theories built on that kind of predictive chain.

And then there’s the math.

NDASA’s headline claim, $700,000 in policy revision costs for 700 employer members, is roughly $1,000 per employer.

As one industry legal analyst noted, presenting a compliance cost equivalent to a routine software subscription as “irreparable harm” justifying an emergency freeze of federal drug policy strains credulity. Employers absorb comparable costs every time any employment regulation changes.

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MMJ’s Phantom Market

The government’s treatment of MMJ is even more pointed.

The company, the brief notes, is “not a current market competitor.”

It has two IND applications pending with the FDA but no product that has completed clinical trials, no approval, and no revenue. Its claimed competitive injury is based on “a future competitive position that has not yet materialized.”

You cannot lose market share in a market you’ve never entered. MMJ’s argument, that rescheduling grants federal legitimacy to state-licensed products while it labors through the FDA pathway, describes a policy disagreement, not a legal injury.

The company’s eight-year wait for DEA bulk manufacturing registration is genuinely frustrating, and its frustration with the agency is understandable. But that grievance is with DEA’s processing timelines, not with a rescheduling order that doesn’t affect its INDs, its Orphan Drug Designation, or its pathway to approval.

MMJ CEO Duane Boise responded angrily to the brief, claiming the government is “telling the Court that protecting patients through the FDA approval process... [is] not [an] interest the Controlled Substances Act was designed to protect.”

But that’s not what the brief says. It says the CSA wasn’t designed to protect MMJ’s anticipated market opportunity — a distinction that matters enormously in standing doctrine, and one Boise’s response conspicuously avoids engaging.

The Treaty Authority Defense

On the merits, DOJ defends the substance of Acting AG Blanche’s action: Section 811(d) of the CSA authorizes the Attorney General to issue scheduling orders as required to comply with international treaty obligations, marijuana remains subject to the Single Convention on Narcotic Drugs, and the department has concluded those obligations can be satisfied with marijuana in Schedule III.

The government also notes that 40 states have already legalized medical cannabis — undermining any claim that the “limited rescheduling order” will materially increase the harms petitioners describe while litigation proceeds.

The petitioners’ strongest card remains the 1977 NORML v. DEA precedent, which held that the treaty bypass can’t be used to choose freely among treaty-compliant schedules.

That merits fight is real and will continue. But a stay requires more than a colorable merits argument — it requires likelihood of success plus irreparable harm plus a public interest favoring the freeze.

The DOJ brief argues persuasively that the petitioners fail all three.

Meanwhile, in Arlington

The litigation is unfolding in parallel with the ALJ hearing that resumes today at DEA headquarters. The proceeding, which began June 29 and runs through July 15, is examining whether marijuana beyond the medical rescheduling should also move to Schedule III.

The government presented its case first, with FDA and clinical witnesses; SAM presents today, followed by DUID Victim Voices, Dr. Kenneth Finn, the Tennessee Bureau of Investigation, Dr. Phillip Drum, and the four state attorneys general through July 14.

The irony of the moment is hard to miss: NDASA argued its case as a designated hearing participant on July 2, exercising the exact administrative process rights it claims were denied, while simultaneously asking a federal court to freeze the policy the hearing is examining.

The DOJ’s brief makes the government’s position clear on both tracks: the rescheduling order was lawful, the challengers’ injuries are speculative pocketbook complaints, and the extraordinary remedy of a stay has no basis.

The D.C. Circuit will rule on the stay motion in the coming weeks. If the court agrees that the petitioners lack standing, the challenge collapses before reaching the merits and the strongest legal threat to rescheduling evaporates with it.

The petitioners asked the court to protect their revenue. The DOJ just asked the court to read their own declarations. That may be all it takes.

This is Third-Party content and does not reflect (or not not reflect) the views of Cannabis Confidential or CB1 Capital.

Anthony Varrell is co-founder of Trade To Black and a thought leader in cannabis capital markets, government relations, and industry insights. Investing in public & private cannabis since 2014 via Stonebridge Partners.